National News

Boeing 737 MAX deliveries in limbo

14 March 2019

Deliveries of Boeing's best-selling 737 MAX jets are effectively frozen, though production continues, after the United States joined a global grounding of the narrow-body model over safety concerns, industry sources say.

The 737 MAX is banned from flying in most countries across the world following an Ethiopian Airlines crash on Sunday that killed all 157 people on board.

It was the second deadly incident for the relatively new Boeing model in five months.

Airlines, aircraft industry experts and financiers said that although the ban would theoretically not prevent some domestic deliveries, most airlines would avoid taking a jet banned from entering service following two crashes in five months.

"Who is going to take delivery of a plane they can't use," said an aviation financier, asking not to be named.

Boeing produces 52 aircraft per month and its newest version, the MAX, represents the lion's share of production, although Boeing declined to break out exact numbers.

Boeing is expected to continue with production of the 737 at its factory outside Seattle, and has been planning to speed up production again in June.

Manufacturers avoid halting and then speeding up production as this disrupts supply chains and can cause industrial snags. But having to hold planes in storage consumes extra cash in increased inventory.

Asked how the global grounding of the 737 MAX would impact deliveries, a Boeing spokesman said: "We continue to assess."

Boeing's main US customers - Southwest Airlines, American Airlines Group Inc and United Airlines - declined comment. So far they have voiced their confidence in the safety of the MAX.

Boeing's 787 Dreamliner was grounded for 123 days in 2013 after its lithium-ion battery packs caught fire. The jet went on to become a popular twin-aisle with a strong safety record.

Aircraft contracts do not typically contain a clause that automatically allows airlines to claim compensation for a regulatory action like a grounding.

However, plane makers do sometimes pay out compensation to cover the cost of financing when an airline is left without a promised plane, said a senior industry source.

Norwegian Air said on Wednesday it would seek compensation from plane maker Boeing for costs and lost revenue due to the 737 MAX 8 grounding.